Forum News RSS Feedhttp://mfdf.org/Thu, 17 Aug 2017 22:24:25 -0400FeedCreator 1.8.3 (obRSS 3.2.7)http://www.mfdf.com/site/pages/images/mfdf_hat_logo_front.jpgReport Sees Steep Drop in Regulatory Penalties Levied Against Industry in 2017Thu, 17 Aug 2017 09:00:00 -0400Thu, 17 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/report-sees-steep-drop-in-regulatory-penalties-levied-against-industry-in-2017Leslie Beckbridge<p>A Wall Street Journal <a href="https://www.wsj.com/articles/regulators-penalties-against-wall-street-are-down-sharply-in-2017-1502028001?tesla=y&amp;mod=djemCapitalJournalDaybreak" target="_blank">report</a> says that the Trump Administration&rsquo;s business friendly stance is partly responsible for a sharp reduction in regulatory fines levied against financial firms for the first six months of the year. According to the report, penalties levied by the SEC, CFTC and FINRA in the first half of 2017 were down nearly two-thirds compared with the first half of 2016 --&nbsp; $489 million in the first half of 2017 compared with $1.4 billion in the 2016 period. The report acknowledged that the falloff in the big cases related to the financial crisis and accounting scandals as well as commissioner vacancies at the regulatory agencies could have played a role. The U.S. Senate only recently <a href="http://www.cftc.gov/PressRoom/PressReleases/pr7596-17" target="_blank">confirmed</a> CFTC Chairman J. Christopher Giancarlo and two SEC Commissioners are yet to be confirmed. The WSJ report quoted representatives who affirmed the regulatory agencies&rsquo; commitment to vigorous enforcement. Other industry participants observed that it may be premature to conclude that the drop in penalties means looser enforcement on the part of regulators.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/lVDuGunH55I" height="1" width="1" alt=""/>A Wall Street Journal report says that the Trump Administration’s business friendly stance is partly responsible for a sharp reduction in regulatory fines levied against financial firms for the first six months of the year. According to the report, penalties levied by the SEC, CFTC and FINRA in the first half of 2017 were down nearly two-thirds compared with the first half of 2016 -- $489 million in the first half of 2017 compared with $1.4 billion in the 2016 period. The report acknowledged that the falloff in the big cases related to the financial crisis and accounting scandals as well as commissioner vacancies at the regulatory agencies could have played a role. The U.S. Senate only recently confirmed CFTC Chairman J. Christopher Giancarlo and two SEC Commissioners are yet to be confirmed. The WSJ report quoted representatives who affirmed the regulatory agencies’ commitment to vigorous enforcement. Other industry participants observed that it may be premature to conclude that the drop in penalties means looser enforcement on the part of regulators.]]>http://mfdf.org/forum-news/article/report-sees-steep-drop-in-regulatory-penalties-levied-against-industry-in-2017DOL Extends Fiduciary Rule Transition Period and Applicability Dates; Releases Additional FAQsWed, 16 Aug 2017 09:00:00 -0400Wed, 16 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/dol-extends-fiduciary-rule-transition-period-and-applicability-datesLeslie Beckbridge<p>The DOL disclosed in a filing submitted in a lawsuit that it was seeking to extend the transition period and delay the applicability dates from January 1, 2018, to July 1, 2019 for the Best Interest Contract Exemption and other key exemptions from the Fiduciary Rule, according to news <a href="https://www.wsj.com/articles/labor-department-seeks-18-month-delay-in-fiduciary-rule-1502305970" target="_blank">reports</a>. The DOL wrote that it has submitted the proposed amendments to the three principal transaction exemptions to the Office of Management and Budget. The DOL also recently <a href="https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/coi-transition-period-2.pdf" target="_blank">addressed</a> questions on the Fiduciary Rule as the industry grapples with uncertainty during the rule&rsquo;s transition period. The first question discussed whether certain service providers to ERISA pension plans needed to update their disclosures to reflect their fiduciary status. The DOL responded generally that only in a few circumstances will such service providers need to update their disclosures, as discussed in <a href="http://www.stradley.com/insights/publications/2017/08/im-briefing-august-8-2017?utm_source=alert&amp;utm_medium=email&amp;utm_campaign=alert-august-8-2017" target="_blank">detail</a> by lawyers from Stradley Ronon. The other questions covered whether recommendations to plan participants and IRA owners to contribute to or increase contributions to a plan or IRA constitute fiduciary investment advice and whether recommendations to employers and other plan fiduciaries on plan design changes intended to increase plan participation and contribution rates constitute fiduciary investment advice. The DOL responded that the recommendations generally would not constitute investment advice. Meanwhile, industry groups are <a href="http://www.investmentnews.com/article/20170807/FREE/170809950/icis-paul-schott-stevens-dol-fiduciary-rule-review-is-opportunity" target="_blank">calling</a> on the DOL to reexamine its rulemaking and for increased SEC involvement in the rulemaking process.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/YMLBrGJLVWY" height="1" width="1" alt=""/>The DOL disclosed in a filing submitted in a lawsuit that it was seeking to extend the transition period and delay the applicability dates from January 1, 2018, to July 1, 2019 for the Best Interest Contract Exemption and other key exemptions from the Fiduciary Rule, according to news reports. The DOL wrote that it has submitted the proposed amendments to the three principal transaction exemptions to the Office of Management and Budget. The DOL also recently addressed questions on the Fiduciary Rule as the industry grapples with uncertainty during the rule’s transition period. The first question discussed whether certain service providers to ERISA pension plans needed to update their disclosures to reflect their fiduciary status. The DOL responded generally that only in a few circumstances will such service providers need to update their disclosures, as discussed in detail by lawyers from Stradley Ronon. The other questions covered whether recommendations to plan participants and IRA owners to contribute to or increase contributions to a plan or IRA constitute fiduciary investment advice and whether recommendations to employers and other plan fiduciaries on plan design changes intended to increase plan participation and contribution rates constitute fiduciary investment advice. The DOL responded that the recommendations generally would not constitute investment advice. Meanwhile, industry groups are calling on the DOL to reexamine its rulemaking and for increased SEC involvement in the rulemaking process. ]]>http://mfdf.org/forum-news/article/dol-extends-fiduciary-rule-transition-period-and-applicability-datesLIBOR Phase-Out May Initially Bring Some Uncertainty in MarketsTue, 15 Aug 2017 09:00:00 -0400Tue, 15 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/libor-phase-out-may-initially-bring-some-uncertainty-in-marketsLeslie Beckbridge<p>The chief of the U.K.&rsquo;s Financial Conduct Authority announced that LIBOR, the inter-bank lending rate, will be phased out in 2021 and that regulators will seek to replace it with a more reliable alternative.&nbsp; LIBOR is a common benchmark used by many mutual funds. The Financial Times <a href="https://www.ft.com/content/529f8553-4edd-337a-8046-ad49e578a138" target="_blank">reported</a> that the FCA chief said LIBOR was unable to fulfill its objective of capturing the cost of banks borrowing from each other because this activity has fallen so sharply since the 2008 financial crisis. LIBOR was at the center of scandal during the financial crisis after it was discovered that major banks were manipulating LIBOR by rigging the rates they submitted. The FCA chief said the process of transitioning away from LIBOR to alternative interest rate benchmarks would take four to five years.&nbsp; According to <a href="https://www.bloomberg.com/news/articles/2017-07-27/libor-to-end-in-2021-as-fca-says-bank-benchmark-is-untenable-j5m5fepe" target="_blank">Bloomberg</a>, the search for a new benchmark may lead to tighter swap markets and lower rates and certain contracts may need to be rewritten and adjusted to remove LIBOR.&nbsp; The Bloomberg report also quoted industry participants who anticipate that the market would need guidance as to possible LIBOR replacements, which could lead to increased volatility and reduced liquidity in the short term.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/2Tnkg-fG0T0" height="1" width="1" alt=""/>The chief of the U.K.’s Financial Conduct Authority announced that LIBOR, the inter-bank lending rate, will be phased out in 2021 and that regulators will seek to replace it with a more reliable alternative. LIBOR is a common benchmark used by many mutual funds. The Financial Times reported that the FCA chief said LIBOR was unable to fulfill its objective of capturing the cost of banks borrowing from each other because this activity has fallen so sharply since the 2008 financial crisis. LIBOR was at the center of scandal during the financial crisis after it was discovered that major banks were manipulating LIBOR by rigging the rates they submitted. The FCA chief said the process of transitioning away from LIBOR to alternative interest rate benchmarks would take four to five years. According to Bloomberg, the search for a new benchmark may lead to tighter swap markets and lower rates and certain contracts may need to be rewritten and adjusted to remove LIBOR. The Bloomberg report also quoted industry participants who anticipate that the market would need guidance as to possible LIBOR replacements, which could lead to increased volatility and reduced liquidity in the short term.]]>http://mfdf.org/forum-news/article/libor-phase-out-may-initially-bring-some-uncertainty-in-marketsMorningstar Study Finds Investors Overreact to Fund Management ChangesMon, 14 Aug 2017 09:00:00 -0400Mon, 14 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/morningstar-study-finds-investors-overreact-to-fund-management-changesLeslie Beckbridge<p>A <a href="http://corporate1.morningstar.com/ResearchLibrary/article/815992/the-aftermath-of-management-change/" target="_blank">study</a> conducted by Morningstar found that a &ldquo;behavioral problem&rdquo; exists among investors in that they react strongly to fund management changes even though most management changes &ldquo;result in business as usual at the fund.&rdquo;&nbsp; Morningstar noted that it sees no need to downgrade a fund every time there is a management change if it feels confident in the parent, the fund&rsquo;s process, and the cost. But investors feel differently. Some key takeaways from the study:</p>
<ul>
<li>Morningstar found no relationship between any type of management changes and future performance returns over the next month up to the next three years.</li>
<li>Investors&rsquo; overreaction to fund-management changes can strengthen over time, persisting up to 36 months after the event.</li>
<li>Investors penalize funds with management changes by withdrawing money even though there is no change in fund performance, and the average fund will experience outflows resulting in lower category percentile growth rates over sustained periods.</li>
<li>The highest-performing funds are given the benefit of the doubt, and investors may think twice before withdrawing money from such funds.</li>
<li>While larger funds are no less likely to perform differently than their smaller peers, investors penalize larger funds more by withdrawing money from the fund at faster rates than small funds.</li>
<li>Fund manager industry experience has no effect on either returns or growth.</li>
</ul><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/0XFZpMGrfjs" height="1" width="1" alt=""/>A study conducted by Morningstar found that a “behavioral problem” exists among investors in that they react strongly to fund management changes even though most management changes “result in business as usual at the fund.” Morningstar noted that it sees no need to downgrade a fund every time there is a management change if it feels confident in the parent, the fund’s process, and the cost. But investors feel differently. Some key takeaways from the study:

Morningstar found no relationship between any type of management changes and future performance returns over the next month up to the next three years.

Investors’ overreaction to fund-management changes can strengthen over time, persisting up to 36 months after the event.

Investors penalize funds with management changes by withdrawing money even though there is no change in fund performance, and the average fund will experience outflows resulting in lower category percentile growth rates over sustained periods.

The highest-performing funds are given the benefit of the doubt, and investors may think twice before withdrawing money from such funds.

While larger funds are no less likely to perform differently than their smaller peers, investors penalize larger funds more by withdrawing money from the fund at faster rates than small funds.

Fund manager industry experience has no effect on either returns or growth.

]]>http://mfdf.org/forum-news/article/morningstar-study-finds-investors-overreact-to-fund-management-changesFintech Firm Applies for Banking Charter; Venture Firms Pour Money into StartupsThu, 10 Aug 2017 09:00:00 -0400Thu, 10 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/fintech-firm-applies-for-banking-charterLeslie Beckbridge<p>According to a Wall Street Journal <a href="https://www.wsj.com/articles/fintech-firm-backed-by-warburg-pincus-files-for-bank-charter-1501002572" target="_blank">report</a>, Varo Money Inc., a digital banking startup, has applied for a national banking charter with the OCC and deposit insurance from the FDIC.&nbsp; Varo, which was founded in 2015, partners with traditional banks to provide deposits and lending services. If approved for a license, Varo would become eligible to accept deposits, pay interest, make loans in any state, and issue cards, using smartphone apps, the WSJ reported. The OCC chief recently <a href="https://www.wsj.com/articles/new-banking-regulator-supports-giving-national-licenses-to-financial-technology-firms-1500484147" target="_blank">expressed</a> support for giving bank charters to fintech firms although state regulators are seeking to block the bank regulator&rsquo;s initiative and have filed lawsuits alleging that the federal government lacks authority to grant such charters. Meanwhile, fintech startups are receiving record amounts of funding from venture firms. Bloomberg, citing a report from CB Insights, <a href="https://www.bloomberg.com/news/articles/2017-07-25/funding-for-fintech-startups-poised-to-hit-a-record-in-2017" target="_blank">reported</a> that so far this year there have been 496 fintech startup deals globally, raising a total of $8 billion, approximately $6.1 billion shy of the annual record set in 2015. Bloomberg reported that some of the sectors seeing the biggest share of investment dollars were blockchain and bitcoin startups, which saw funding increase 100 percent on a quarterly basis.&nbsp; Regulators are also exploring the growth of the fintech industry. FINRA and the CFTC recently announced initiatives aimed at understanding and adapting to fintech innovations. The CFTC <a href="http://www.cftc.gov/PressRoom/PressReleases/pr7558-17" target="_blank">announced</a> in mid-May that it will launch LabCFTC, two programs designed to help fintech innovators engage with the agency, and FINRA recently <a href="http://www.finra.org/newsroom/2017/finra-launches-innovation-outreach-initiative" target="_blank">launched</a> its Innovation Outreach Initiative, which among other things will create a committee to facilitate discussion and receive feedback from the industry on how FINRA rules interact with fintech innovations.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/wM0Yir3702c" height="1" width="1" alt=""/>According to a Wall Street Journal report, Varo Money Inc., a digital banking startup, has applied for a national banking charter with the OCC and deposit insurance from the FDIC. Varo, which was founded in 2015, partners with traditional banks to provide deposits and lending services. If approved for a license, Varo would become eligible to accept deposits, pay interest, make loans in any state, and issue cards, using smartphone apps, the WSJ reported. The OCC chief recently expressed support for giving bank charters to fintech firms although state regulators are seeking to block the bank regulator’s initiative and have filed lawsuits alleging that the federal government lacks authority to grant such charters. Meanwhile, fintech startups are receiving record amounts of funding from venture firms. Bloomberg, citing a report from CB Insights, reported that so far this year there have been 496 fintech startup deals globally, raising a total of $8 billion, approximately $6.1 billion shy of the annual record set in 2015. Bloomberg reported that some of the sectors seeing the biggest share of investment dollars were blockchain and bitcoin startups, which saw funding increase 100 percent on a quarterly basis. Regulators are also exploring the growth of the fintech industry. FINRA and the CFTC recently announced initiatives aimed at understanding and adapting to fintech innovations. The CFTC announced in mid-May that it will launch LabCFTC, two programs designed to help fintech innovators engage with the agency, and FINRA recently launched its Innovation Outreach Initiative, which among other things will create a committee to facilitate discussion and receive feedback from the industry on how FINRA rules interact with fintech innovations.]]>http://mfdf.org/forum-news/article/fintech-firm-applies-for-banking-charterSEC Inquiry and Report Foreshadows Increased Scrutiny for Digital Coin CompaniesWed, 09 Aug 2017 09:00:00 -0400Wed, 09 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/sec-inquiry-and-report-foreshadows-increased-scrutiny-for-digital-coin-companiesLeslie Beckbridge<p>The SEC recently acknowledged that businesses and individuals are increasingly using initial coin offerings to raise capital and the emergence of related technology could affect the funds industry. The agency issued an <a href="https://www.sec.gov/litigation/investreport/34-81207.pdf" target="_blank">investigative report</a> describing an inquiry into a virtual organization known as The DAO and its use of distributed ledger, or blockchain, technology to facilitate the offer and sale of DAO Tokens to raise capital.&nbsp; The SEC determined after its inquiry that DAO Tokens were securities. The investigation was limited to The DAO organization and no enforcement action was pursued. However, the SEC report emphasized that &ldquo;the U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale.&rdquo;&nbsp; After the SEC released its report, stocks in digital currencies such as blockchain fell, the Wall Street Journal <a href="https://www.wsj.com/articles/digital-coin-companies-shrug-off-sec-scrutiny-1501110893" target="_blank">reported</a>, even though industry participants said they had expected the SEC&rsquo;s findings and did not expect to change their plans to raise money through coin offerings.&nbsp; In a related news <a href="https://www.sec.gov/news/press-release/2017-131" target="_blank">release</a>, SEC Chairman Jay Clayton said: &ldquo;The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,&rdquo;&nbsp;adding that while the agency seeks to encourage innovative ways to raise capital it also wants to ensure that investors and markets are protected.&nbsp; The SEC also released an <a href="https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-initial-coin-offerings" target="_blank">investor bulletin</a> explaining initial coin offerings and highlighted the warning signs of investment fraud to investors.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/7RMisHrkVQQ" height="1" width="1" alt=""/>The SEC recently acknowledged that businesses and individuals are increasingly using initial coin offerings to raise capital and the emergence of related technology could affect the funds industry. The agency issued an investigative report describing an inquiry into a virtual organization known as The DAO and its use of distributed ledger, or blockchain, technology to facilitate the offer and sale of DAO Tokens to raise capital. The SEC determined after its inquiry that DAO Tokens were securities. The investigation was limited to The DAO organization and no enforcement action was pursued. However, the SEC report emphasized that “the U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale.” After the SEC released its report, stocks in digital currencies such as blockchain fell, the Wall Street Journal reported, even though industry participants said they had expected the SEC’s findings and did not expect to change their plans to raise money through coin offerings. In a related news release, SEC Chairman Jay Clayton said: “The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” adding that while the agency seeks to encourage innovative ways to raise capital it also wants to ensure that investors and markets are protected. The SEC also released an investor bulletin explaining initial coin offerings and highlighted the warning signs of investment fraud to investors.]]>http://mfdf.org/forum-news/article/sec-inquiry-and-report-foreshadows-increased-scrutiny-for-digital-coin-companiesSSGA Withholds Votes for Board Chairs, Nominating and Governance Members over Lack of Female DirectorsTue, 08 Aug 2017 09:00:00 -0400Tue, 08 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/ssga-withholds-votesLeslie Beckbridge<p>State Street Global Advisors, which adopted a widely publicized board diversity <a href="https://www.ssga.com/investment-topics/environmental-social-governance/2017/guidance-on-enhancing-gender-diversity-on-boards.pdf" target="_blank">policy</a> earlier this year, voted against reelection of the chair or the most senior member of a board&rsquo;s nominating and governance committee at 400 companies with all male boards, according to <a href="https://www.bloomberg.com/news/articles/2017-07-26/after-fearless-girl-state-street-puts-men-only-boards-on-notice" target="_blank">Bloomberg</a>. State Street said its voting record with respect to the companies will appear in September regulatory filings. State Street had sent letters in advance to 476 mostly U.S.-based companies saying it planned to withhold the votes. According to a Wall Street Journal <a href="https://www.wsj.com/articles/state-street-votes-against-400-companies-citing-gender-diversity-1501029490" target="_blank">report</a>, State Street had productive discussions with 42 of the 76 companies which had no female board members and the remaining 34 did not hold the relevant elections this year.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/Q8cTEsuC1n4" height="1" width="1" alt=""/>State Street Global Advisors, which adopted a widely publicized board diversity policy earlier this year, voted against reelection of the chair or the most senior member of a board’s nominating and governance committee at 400 companies with all male boards, according to Bloomberg. State Street said its voting record with respect to the companies will appear in September regulatory filings. State Street had sent letters in advance to 476 mostly U.S.-based companies saying it planned to withhold the votes. According to a Wall Street Journal report, State Street had productive discussions with 42 of the 76 companies which had no female board members and the remaining 34 did not hold the relevant elections this year.]]>http://mfdf.org/forum-news/article/ssga-withholds-votesLaw Professor Eyed for SEC Commissioner Slot; Clayton Speech Gives Nod to Active InvestingMon, 07 Aug 2017 09:00:00 -0400Mon, 07 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/law-professor-eyed-for-sec-commissioner-slotLeslie Beckbridge<p>President Trump is expected to select Robert Jackson, a law professor at Columbia University, to fill the Democratic commissioner vacancy at the SEC, the Wall Street Journal reported. Hester Peirce, was recently re-nominated to the Republican spot. If approved, the nominees would join SEC Chairman Jay Clayton and Commissioners Kara Stein and Michael Piwowar. The Wall Street Journal <a href="https://www.wsj.com/articles/trump-eyes-columbia-professor-for-sec-seat-1501271290" target="_blank">reported</a> that Jackson has written on the securities industry, including on corporate governance and executive compensation and is also among a group of 10 academics to&nbsp;petition the SEC in 2011&nbsp;to require public companies to disclose their political-spending activities. Meanwhile, Chair Clayton in a recent speech continued to map out his priorities for the agency three months into his tenure. He <a href="https://www.wsj.com/articles/sec-chairman-puts-in-a-good-word-for-active-investing-1501086299" target="_blank">acknowledged</a> the industry shift from active investing toward passively managed investments and said that he personally has achieved better results from active investing despite being a longtime index investor. Clayton also expressed optimism for a fiduciary rule that would capture both the DOL&rsquo;s and SEC&rsquo;s priorities while benefiting retirement investors. Clayton said he was personally dismayed by the continuing prevalence of fraud against retail investors. Peter Driscoll, an acting chief of OCIE, said at a separate event that the agency will increase its focus on protecting retail investors and likely reduce its scrutiny on private equity firms, according to a WSJ <a href="https://www.wsj.com/articles/sec-scrutiny-of-private-equity-may-dwindle-official-says-1501185494" target="_blank">report</a>.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/fPWoNe5T_iw" height="1" width="1" alt=""/>President Trump is expected to select Robert Jackson, a law professor at Columbia University, to fill the Democratic commissioner vacancy at the SEC, the Wall Street Journal reported. Hester Peirce, was recently re-nominated to the Republican spot. If approved, the nominees would join SEC Chairman Jay Clayton and Commissioners Kara Stein and Michael Piwowar. The Wall Street Journal reported that Jackson has written on the securities industry, including on corporate governance and executive compensation and is also among a group of 10 academics to petition the SEC in 2011 to require public companies to disclose their political-spending activities. Meanwhile, Chair Clayton in a recent speech continued to map out his priorities for the agency three months into his tenure. He acknowledged the industry shift from active investing toward passively managed investments and said that he personally has achieved better results from active investing despite being a longtime index investor. Clayton also expressed optimism for a fiduciary rule that would capture both the DOL’s and SEC’s priorities while benefiting retirement investors. Clayton said he was personally dismayed by the continuing prevalence of fraud against retail investors. Peter Driscoll, an acting chief of OCIE, said at a separate event that the agency will increase its focus on protecting retail investors and likely reduce its scrutiny on private equity firms, according to a WSJ report.]]>http://mfdf.org/forum-news/article/law-professor-eyed-for-sec-commissioner-slotAppeals Court Affirms that Plaintiff in 36(b) Case Lacked Standing to Challenge Acquired Fund Fees Thu, 03 Aug 2017 09:00:00 -0400Thu, 03 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/appeals-court-affirms-that-plaintiff-in-36b-case-lacked-standingLeslie Beckbridge<p>An Eighth Circuit panel recently <a href="http://media.ca8.uscourts.gov/opndir/17/07/161576P.pdf" target="_blank">agreed</a> with an Iowa district court&rsquo;s dismissal of a Section 36(b) lawsuit brought by American Chemicals &amp; Equipment Inc. 401 (K) Retirement Plan against Principal Management Corp. The district court ruled that the retirement plan lacked standing to challenge fees charged to underlying funds held in six LifeTime Funds, target date funds that the retirement plan invested in. The retirement plan argued on appeal that a portion of the fees paid by the underlying funds to Principal Management were &ldquo;compensation for services&rdquo; or &ldquo;payments of a material nature&rdquo; that were &ldquo;paid by&rdquo; the LifeTime Funds with respect to their investment in the underlying funds. The court determined, however, that the acquired fund fees were paid by the underlying funds and not by the LifeTime Funds in which the retirement plan was a shareholder. According to the opinion, while adviser fees and other costs reflected in the acquired fund fees reduced the net asset value of the underlying fund paying the fees, which in turn reduced the value of the LifeTime Funds&rsquo; holdings in the underlying fund, &ldquo;the mere reduction of an asset&rsquo;s value does not mean that the reduction was paid by the asset&rsquo;s investors.&rdquo; The court concluded that since the retirement plan had no security interest in the underlying funds, the retirement plan could not sue on behalf of a fund in which it lacks an interest.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/wZX8P5qfuwo" height="1" width="1" alt=""/>An Eighth Circuit panel recently agreed with an Iowa district court’s dismissal of a Section 36(b) lawsuit brought by American Chemicals & Equipment Inc. 401 (K) Retirement Plan against Principal Management Corp. The district court ruled that the retirement plan lacked standing to challenge fees charged to underlying funds held in six LifeTime Funds, target date funds that the retirement plan invested in. The retirement plan argued on appeal that a portion of the fees paid by the underlying funds to Principal Management were “compensation for services” or “payments of a material nature” that were “paid by” the LifeTime Funds with respect to their investment in the underlying funds. The court determined, however, that the acquired fund fees were paid by the underlying funds and not by the LifeTime Funds in which the retirement plan was a shareholder. According to the opinion, while adviser fees and other costs reflected in the acquired fund fees reduced the net asset value of the underlying fund paying the fees, which in turn reduced the value of the LifeTime Funds’ holdings in the underlying fund, “the mere reduction of an asset’s value does not mean that the reduction was paid by the asset’s investors.” The court concluded that since the retirement plan had no security interest in the underlying funds, the retirement plan could not sue on behalf of a fund in which it lacks an interest.]]>http://mfdf.org/forum-news/article/appeals-court-affirms-that-plaintiff-in-36b-case-lacked-standingResearchers Find Industry Shifts Contributing to “Noise” in Price of Securities Wed, 02 Aug 2017 09:00:00 -0400Wed, 02 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/researchers-find-industry-shifts-contributing-to-noiseLeslie Beckbridge<p>A recent <a href="https://corpgov.law.harvard.edu/2017/07/20/developments-in-the-asset-management-industry/" target="_blank">article</a> by Ohio State University academics examined the consequences of recent developments in the asset management industry, particularly industry concentration and the shift toward index-based passive investment vehicles, and suggested that the changes are leading to &ldquo;noise&rdquo; in the prices of securities particularly during times of market stress. The authors concluded that &ldquo;the performance and risk of securities is not only determined by their cash flows and prospects but also by the nature of their investors.&rdquo;The authors noted that increasing industry concentration has led to disproportionately larger trades by asset managers, which in turn has led to greater volatility in the underlying securities.&nbsp; The article cited the example of the September 2014 departure of Bill Gross, co-founder of PIMCO, which led to large withdrawals in PIMCO&rsquo;s Total Return Fund and the liquidation of some of the fund&rsquo;s holdings -- the effects of which spread to wider bond and futures prices. The researchers observed that while the PIMCO event may have been unusual, massive trades by large institutions as a result of portfolio rebalancing or correlated trades across large organizations could cause market disruptions &ldquo;since their trades are large relative to typical market volume.&rdquo; The authors also noted that the rise of ETFs affect the character of the securities and illustrated how one event &ndash; such as a large hedge fund purchasing a large number of ETF shares to rebalance its portfolio -- can result in disturbances in ETF prices that could be then transmitted to underlying stocks.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/ztefoGG6KxM" height="1" width="1" alt=""/>A recent article by Ohio State University academics examined the consequences of recent developments in the asset management industry, particularly industry concentration and the shift toward index-based passive investment vehicles, and suggested that the changes are leading to “noise” in the prices of securities particularly during times of market stress. The authors concluded that “the performance and risk of securities is not only determined by their cash flows and prospects but also by the nature of their investors.”The authors noted that increasing industry concentration has led to disproportionately larger trades by asset managers, which in turn has led to greater volatility in the underlying securities. The article cited the example of the September 2014 departure of Bill Gross, co-founder of PIMCO, which led to large withdrawals in PIMCO’s Total Return Fund and the liquidation of some of the fund’s holdings -- the effects of which spread to wider bond and futures prices. The researchers observed that while the PIMCO event may have been unusual, massive trades by large institutions as a result of portfolio rebalancing or correlated trades across large organizations could cause market disruptions “since their trades are large relative to typical market volume.” The authors also noted that the rise of ETFs affect the character of the securities and illustrated how one event – such as a large hedge fund purchasing a large number of ETF shares to rebalance its portfolio -- can result in disturbances in ETF prices that could be then transmitted to underlying stocks. ]]>http://mfdf.org/forum-news/article/researchers-find-industry-shifts-contributing-to-noiseSEC Rulemaking Agenda Pared for Fiscal Year 2017Tue, 01 Aug 2017 09:00:00 -0400Tue, 01 Aug 2017 09:00:00 -0400http://mfdf.org/forum-news/article/sec-rulemaking-agenda-pared-for-fiscal-year-2017Leslie Beckbridge<p>Bloomberg recently <a href="https://www.bna.com/sec-trump-slashes-n73014462040/" target="_blank">reported</a> that the SEC has significantly trimmed its rulemaking agenda for 2017.&nbsp; Under former Chairwoman Mary Jo White, the SEC&rsquo;s fall 2016 rulemaking <a href="https://resources.regulations.gov/public/custom/jsp/navigation/main.jsp" target="_blank">agenda</a> included 62 items in various categories from proposed rules to long-term or completed actions, including regulatory action on Dodd-Frank provisions, ETFs and corporate board diversity. The current rulemaking&nbsp;<a href="https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&amp;currentPub=true&amp;agencyCode=&amp;showStage=active&amp;agencyCd=3235&amp;Image58.x=49&amp;Image58.y=15" target="_blank">list</a>&nbsp;released on July 20 contains 33 items in the proposed and final rule categories, including measures on <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201704&amp;RIN=3235-AJ60" target="_blank">ETFs</a> and <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201704&amp;RIN=3235-AL60" target="_blank">derivatives</a>. The agenda also includes a <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201704&amp;RIN=3235-AM01" target="_blank">recommendation</a> to amend the Loan Rule (regarding the independence of an accountant when the accountant has a lending relationship with an entity that holds securities of the accountant&rsquo;s audit client). The SEC in 2016 <a href="https://www.sec.gov/divisions/investment/noaction/2016/fidelity-management-research-company-062016.htm" target="_blank">granted</a> no-action relief on the Loan Rule&rsquo;s applicability but that relief will expire at the end of 2017. The current agenda was drafted under Acting Chairman Michael Piwowar before Jay Clayton became SEC chairman in May. The current agenda excluded a number of items on the 2016 list, including a proposal for a uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers. The regulatory agenda is a nonbinding indicator of the rulemaking plans of the SEC Chair and staff.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/q868gBDIfOY" height="1" width="1" alt=""/>Bloomberg recently reported that the SEC has significantly trimmed its rulemaking agenda for 2017. Under former Chairwoman Mary Jo White, the SEC’s fall 2016 rulemaking agenda included 62 items in various categories from proposed rules to long-term or completed actions, including regulatory action on Dodd-Frank provisions, ETFs and corporate board diversity. The current rulemaking list released on July 20 contains 33 items in the proposed and final rule categories, including measures on ETFs and derivatives. The agenda also includes a recommendation to amend the Loan Rule (regarding the independence of an accountant when the accountant has a lending relationship with an entity that holds securities of the accountant’s audit client). The SEC in 2016 granted no-action relief on the Loan Rule’s applicability but that relief will expire at the end of 2017. The current agenda was drafted under Acting Chairman Michael Piwowar before Jay Clayton became SEC chairman in May. The current agenda excluded a number of items on the 2016 list, including a proposal for a uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers. The regulatory agenda is a nonbinding indicator of the rulemaking plans of the SEC Chair and staff. ]]>http://mfdf.org/forum-news/article/sec-rulemaking-agenda-pared-for-fiscal-year-2017Piwowar Letter Lays Out Concerns with Fiduciary Rule; Firms Request Compliance Date DelayMon, 31 Jul 2017 09:00:00 -0400Mon, 31 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/piwowar-letter-lays-out-concerns-with-fiduciary-ruleLeslie Beckbridge<p>SEC Commissioner Michael Piwowar submitted a <a href="https://www.sec.gov/news/public-statement/piwowar-comment-dol-fiduciary-rule-prohibited-transaction-exemptions" target="_blank">response</a> to the DOL&rsquo;s request for public input on the embattled Fiduciary Rule, stating three major concerns. Piwowar contended that the Fiduciary Rule discounts the effectiveness of disclosure-based remedies to conflicts of interest in the financial services industry. &ldquo;Rather than dismiss out of hand the role of disclosure in policing conflicts of interest, I would strongly encourage the Department to redouble its efforts to work with the Commission and its expert staff, who may bring to bear our decades of experience in enforcing multiple disclosure-based regimes,&rdquo; Piwowar wrote. He also asserted that the rule fails to distinguish between the securities&nbsp;<em>selling</em><em>&nbsp;</em>activities of broker-dealers and their regulatory regime and the&nbsp;<em>advice</em><em>&nbsp;</em>activities in which regulated investment advisers engage and noted that the existing regulatory regimes provide &ldquo;effective oversight of the specific activities they were designed to address.&rdquo; Finally, Piwowar contended that the Fiduciary Rule will have a dramatic impact on the financial services industry as a whole and will be disruptive of the broker-client relationship in general. Meanwhile, the Wall Street Journal is <a href="https://www.wsj.com/articles/fiduciary-rule-accelerates-account-shift-across-brokerage-industry-1500494055" target="_blank">reporting</a> that the rise in fee-based assets at large brokerage firms and increase in assets in self-directed accounts at discount firms is at least partly attributable to the Fiduciary Rule. Although the shift has been going on for years, the WSJ reported that the shift has accelerated since the DOL released the Fiduciary Rule last year. According to the WSJ report, fee-based accounts are favored under the Fiduciary Rule because they do not incentivize brokers to promote particular products based on commissions, and self-directed brokerage accounts allow investors who trade infrequently to minimize costs. Meanwhile, political opponents of the rule continue <a href="http://www.investmentnews.com/article/20170719/FREE/170719918/house-panel-passes-bill-to-replace-dol-fiduciary-rule-with-one" target="_blank">efforts</a> to repeal it as <a href="https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB79-and-1210-AB82#AB79" target="_blank">requests</a> to delay the compliance date flood into the DOL.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/OB0ENmI1l4o" height="1" width="1" alt=""/>SEC Commissioner Michael Piwowar submitted a response to the DOL’s request for public input on the embattled Fiduciary Rule, stating three major concerns. Piwowar contended that the Fiduciary Rule discounts the effectiveness of disclosure-based remedies to conflicts of interest in the financial services industry. “Rather than dismiss out of hand the role of disclosure in policing conflicts of interest, I would strongly encourage the Department to redouble its efforts to work with the Commission and its expert staff, who may bring to bear our decades of experience in enforcing multiple disclosure-based regimes,” Piwowar wrote. He also asserted that the rule fails to distinguish between the securities sellingactivities of broker-dealers and their regulatory regime and the adviceactivities in which regulated investment advisers engage and noted that the existing regulatory regimes provide “effective oversight of the specific activities they were designed to address.” Finally, Piwowar contended that the Fiduciary Rule will have a dramatic impact on the financial services industry as a whole and will be disruptive of the broker-client relationship in general. Meanwhile, the Wall Street Journal is reporting that the rise in fee-based assets at large brokerage firms and increase in assets in self-directed accounts at discount firms is at least partly attributable to the Fiduciary Rule. Although the shift has been going on for years, the WSJ reported that the shift has accelerated since the DOL released the Fiduciary Rule last year. According to the WSJ report, fee-based accounts are favored under the Fiduciary Rule because they do not incentivize brokers to promote particular products based on commissions, and self-directed brokerage accounts allow investors who trade infrequently to minimize costs. Meanwhile, political opponents of the rule continue efforts to repeal it as requests to delay the compliance date flood into the DOL. ]]>http://mfdf.org/forum-news/article/piwowar-letter-lays-out-concerns-with-fiduciary-ruleHester Peirce to be Nominated as SEC CommissionerThu, 27 Jul 2017 09:00:00 -0400Thu, 27 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/hester-peirce-to-be-nominated-as-sec-commissionerLeslie Beckbridge<p>President Trump <a href="https://www.whitehouse.gov/the-press-office/2017/07/18/president-donald-j-trump-announces-intent-nominate-personnel-key-0" target="_blank">announced</a> plans to nominate Hester Peirce, a former SEC staff attorney and counsel to Republicans on the Senate Banking Committee, to fill one of the Commissioner vacancies at the SEC. Peirce previously was nominated as SEC commissioner during the Obama administration but the full Senate did not act on her nomination. Peirce currently serves as the Senior Research Fellow and Director of the Financial Markets Working Group at the Mercatus Center at George Mason University. The Wall Street Journal <a href="https://www.wsj.com/articles/white-house-to-nominate-hester-peirce-as-republican-sec-commissioner-1500417225" target="_blank">reported</a> that Peirce as a Commissioner would make it easier for SEC Chairman Jay Clayton to carry out an agenda focused on reducing regulatory burdens for public companies.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/BxVnBWusiKw" height="1" width="1" alt=""/>President Trump announced plans to nominate Hester Peirce, a former SEC staff attorney and counsel to Republicans on the Senate Banking Committee, to fill one of the Commissioner vacancies at the SEC. Peirce previously was nominated as SEC commissioner during the Obama administration but the full Senate did not act on her nomination. Peirce currently serves as the Senior Research Fellow and Director of the Financial Markets Working Group at the Mercatus Center at George Mason University. The Wall Street Journal reported that Peirce as a Commissioner would make it easier for SEC Chairman Jay Clayton to carry out an agenda focused on reducing regulatory burdens for public companies.]]>http://mfdf.org/forum-news/article/hester-peirce-to-be-nominated-as-sec-commissionerLawmakers ask Clayton to Revisit Board Diversity Initiatives, Consider New RuleWed, 26 Jul 2017 09:00:00 -0400Wed, 26 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/lawmakers-ask-clayton-to-revisit-board-diversity-initiativesLeslie Beckbridge<p>Two groups of lawmakers <a href="https://corpgov.law.harvard.edu/2017/07/06/congressional-lawmakers-push-sec-chairman-to-focus-on-board-diversity-disclosure/" target="_blank">wrote</a> to SEC Chairman Jay Clayton urging a renewed focus on requiring companies to reference board diversity in their regulatory disclosures. Earlier this year, large firms, including State Street, <a href="https://www.ssga.com/investment-topics/environmental-social-governance/2017/guidance-on-enhancing-gender-diversity-on-boards.pdf" target="_blank">went public</a> with their efforts to increase and encourage diversity on boards of directors in the corporate sector. Most recently, BlackRock voted for eight proposals to encourage U.S. and Canadian firms to adopt policies boosting their boards&rsquo; diversity, Reuters <a href="https://www.reuters.com/article/us-blackrock-women-idUSKBN19Z09C" target="_blank">reported</a>.&nbsp; In one lawmaker&rsquo;s <a href="http://maloney.house.gov/sites/maloney.house.gov/files/Maloney%20Beyer%20Ltr%20Clayton%205.30.2017.pdf" target="_blank">request</a> Clayton was asked to reconsider his predecessor&rsquo;s review of proxy statement disclosure rules regarding diversity of board nominees while the other <a href="https://meeks.house.gov/media/press-releases/rep-meeks-sends-letter-improving-corporate-board-diversity-disclosures-sec" target="_blank">proposal</a> asked Clayton to &ldquo;go beyond mere monitoring compliance and work with your fellow commissioners to propose a new corporate board diversity rule subject to public input.&rdquo;&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/l9Uh7OKeOPI" height="1" width="1" alt=""/>Two groups of lawmakers wrote to SEC Chairman Jay Clayton urging a renewed focus on requiring companies to reference board diversity in their regulatory disclosures. Earlier this year, large firms, including State Street, went public with their efforts to increase and encourage diversity on boards of directors in the corporate sector. Most recently, BlackRock voted for eight proposals to encourage U.S. and Canadian firms to adopt policies boosting their boards’ diversity, Reuters reported. In one lawmaker’s request Clayton was asked to reconsider his predecessor’s review of proxy statement disclosure rules regarding diversity of board nominees while the other proposal asked Clayton to “go beyond mere monitoring compliance and work with your fellow commissioners to propose a new corporate board diversity rule subject to public input.” ]]>http://mfdf.org/forum-news/article/lawmakers-ask-clayton-to-revisit-board-diversity-initiativesFed Sees Minor Liquidity Challenges, Continued Resilience in Financial Sector Tue, 25 Jul 2017 09:00:00 -0400Tue, 25 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/fed-sees-minor-liquidity-challenges-continued-resilience-in-financial-sectorLeslie Beckbridge<p>The Federal Reserve recently released its semi-annual Monetary Policy <a href="https://www.federalreserve.gov/monetarypolicy/files/20170707_mprfullreport.pdf" target="_blank">Report</a> which addressed lawmakers&rsquo; questions on Fed policies and provided a picture of the U.S. financial system based on recent economic data. The Fed concluded that the &ldquo;vulnerabilities in the U.S. financial system remained, on balance, moderate&rdquo; and partially attributed the financial system&rsquo;s improved resilience to the fact that U.S. banks maintain &ldquo;substantial amounts of capital and liquidity.&rdquo; Bloomberg also <a href="https://www.bloomberg.com/news/articles/2017-07-07/fed-says-post-crisis-rules-may-sap-bond-market-liquidity" target="_blank">reported</a> on the Fed&rsquo;s take on post-financial crisis regulations, stressing the impact of post financial crisis rules on market liquidity. The Fed report acknowledged that recent regulatory reforms may have altered financial institutions&rsquo; incentives to provide liquidity, but pointed out:&nbsp; &ldquo; [T]he available evidence does not point to any substantial impairment in liquidity in major financial markets in recent years. In addition, financial markets have generally performed well during recent episodes of financial stress.&rdquo; The report also noted that valuation pressures across a range of assets, including Treasury securities, equities, corporate bonds, and commercial real estate, have increased since mid-February. However, these developments have not increased leverage in the financial sector, or increased borrowing in the nonfinancial sector, the report said.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/2ATx_YyBw0M" height="1" width="1" alt=""/>The Federal Reserve recently released its semi-annual Monetary Policy Report which addressed lawmakers’ questions on Fed policies and provided a picture of the U.S. financial system based on recent economic data. The Fed concluded that the “vulnerabilities in the U.S. financial system remained, on balance, moderate” and partially attributed the financial system’s improved resilience to the fact that U.S. banks maintain “substantial amounts of capital and liquidity.” Bloomberg also reported on the Fed’s take on post-financial crisis regulations, stressing the impact of post financial crisis rules on market liquidity. The Fed report acknowledged that recent regulatory reforms may have altered financial institutions’ incentives to provide liquidity, but pointed out: “ [T]he available evidence does not point to any substantial impairment in liquidity in major financial markets in recent years. In addition, financial markets have generally performed well during recent episodes of financial stress.” The report also noted that valuation pressures across a range of assets, including Treasury securities, equities, corporate bonds, and commercial real estate, have increased since mid-February. However, these developments have not increased leverage in the financial sector, or increased borrowing in the nonfinancial sector, the report said.]]>http://mfdf.org/forum-news/article/fed-sees-minor-liquidity-challenges-continued-resilience-in-financial-sectorClayton Charts Path Forward with Key Principles, Says Regulatory Architecture is SoundMon, 24 Jul 2017 09:00:00 -0400Mon, 24 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/clayton-charts-path-forwardLeslie Beckbridge<p>SEC Chairman Jay Clayton in his first public <a href="https://www.sec.gov/news/speech/remarks-economic-club-new-york" target="_blank">speech</a> reiterated the agency&rsquo;s mission and its alignment with the long-term interests of the &ldquo;Main Street investor.&rdquo; The speech covered several guiding principles and action areas, including investor education, capital formation and enforcement and examinations. Clayton appeared to advocate a conservative approach to rulemaking, noting the SEC&rsquo;s &ldquo;sound&rdquo; historic approach to regulation. &ldquo;It is abundantly clear that wholesale changes to the Commission&rsquo;s fundamental regulatory approach would not make sense,&rdquo; he said. He called for the agency to &ldquo;review its rules retrospectively&rdquo; with input from investors and others and to be &ldquo;introspective and self-critical&rdquo; in that regard.<br /> <br />Going forward, Clayton said the SEC would focus on improved investor education and disclosures, among other areas. He acknowledged the growth in technological innovation, stating that the SEC is &ldquo;adapting machine learning and artificial intelligence to new functions, such as analyzing regulatory filings.&rdquo; Clayton&rsquo;s take on cybersecurity appeared to break with recent <a href="http://www.reuters.com/article/us-usa-sec-enforcement-exclusive-idUSKBN18Z2TX" target="_blank">views</a> that the topic would become a major enforcement priority. Clayton acknowledged the seriousness of cyber threats but urged caution regarding&ldquo;punishing responsible companies who nevertheless are victims of sophisticated cyber penetrations.&rdquo; He added that the SEC needs to bring &ldquo;proportionality&rdquo; and adopt a broad perspective in the area of cybersecurity. Clayton also stressed a need for clarity and consistency with respect to the DOL Fiduciary Rule, and said he hoped the SEC could work with the Department of Labor in a way that best serves the long-term interests of investors.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/NIuPiHn5FO8" height="1" width="1" alt=""/>SEC Chairman Jay Clayton in his first public speech reiterated the agency’s mission and its alignment with the long-term interests of the “Main Street investor.” The speech covered several guiding principles and action areas, including investor education, capital formation and enforcement and examinations. Clayton appeared to advocate a conservative approach to rulemaking, noting the SEC’s “sound” historic approach to regulation. “It is abundantly clear that wholesale changes to the Commission’s fundamental regulatory approach would not make sense,” he said. He called for the agency to “review its rules retrospectively” with input from investors and others and to be “introspective and self-critical” in that regard.

Going forward, Clayton said the SEC would focus on improved investor education and disclosures, among other areas. He acknowledged the growth in technological innovation, stating that the SEC is “adapting machine learning and artificial intelligence to new functions, such as analyzing regulatory filings.” Clayton’s take on cybersecurity appeared to break with recent views that the topic would become a major enforcement priority. Clayton acknowledged the seriousness of cyber threats but urged caution regarding“punishing responsible companies who nevertheless are victims of sophisticated cyber penetrations.” He added that the SEC needs to bring “proportionality” and adopt a broad perspective in the area of cybersecurity. Clayton also stressed a need for clarity and consistency with respect to the DOL Fiduciary Rule, and said he hoped the SEC could work with the Department of Labor in a way that best serves the long-term interests of investors.]]>http://mfdf.org/forum-news/article/clayton-charts-path-forwardCFPB Bans Forced Arbitration; Opens Door for Suits against Financial Services Firms Thu, 20 Jul 2017 09:00:00 -0400Thu, 20 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/cfpb-bans-forced-arbitrationLeslie Beckbridge<p>The Bureau of Consumer Financial Protection completed a <a href="http://files.consumerfinance.gov/f/documents/201707_cfpb_Arbitration-Agreements-Rule.pdf" target="_blank">rule</a> originally proposed in May 2016 that prohibits banks and other consumer financial firms from including mandatory arbitration clauses that block class-action lawsuits in consumer contracts. &nbsp;The rule does not apply to SEC-regulated entities. The Wall Street Journal <a href="https://www.wsj.com/articles/cfpb-completes-rule-allowing-class-action-lawsuits-against-banks-1499712133?tesla=y" target="_blank">reported</a> that the rule has drawn strong opposition from banking regulators and Republican lawmakers have launched an effort to repeal it. CFPB Director Richard Cordray clarified that the rule does not ban arbitration clauses outright but the clauses must &ldquo;say explicitly that they cannot be used to stop consumers from banding together to pursue relief as a group.&rdquo; Lawmakers are continuing to call for Cordray&rsquo;s ouster as a legal battle continues over whether the CFPB&rsquo;s structure is constitutional. Cordray along with consumer groups hail the rule as a victory for consumers, the WSJ reported. &ldquo;By restoring the ability of consumers to file or join group lawsuits, the rule gives companies more incentive to comply with the law. And the deterrent effect of such cases can more broadly influence the business practices of other companies as well,&rdquo; read a <a href="https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-director-richard-cordray-arbitration-rule-announcement/" target="_blank">statement</a> from Cordray. The rule also requires companies to insert language into their arbitration agreements reflecting the rule&rsquo;s limitations and to submit their claims, awards, and other information about the arbitration of individual disputes to the CFPB to help the agency monitor arbitrations.&nbsp;</p><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=onIb9p6jlWo:AsdeeuKRZsM:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/onIb9p6jlWo" height="1" width="1" alt=""/>The Bureau of Consumer Financial Protection completed a rule originally proposed in May 2016 that prohibits banks and other consumer financial firms from including mandatory arbitration clauses that block class-action lawsuits in consumer contracts. The rule does not apply to SEC-regulated entities. The Wall Street Journal reported that the rule has drawn strong opposition from banking regulators and Republican lawmakers have launched an effort to repeal it. CFPB Director Richard Cordray clarified that the rule does not ban arbitration clauses outright but the clauses must “say explicitly that they cannot be used to stop consumers from banding together to pursue relief as a group.” Lawmakers are continuing to call for Cordray’s ouster as a legal battle continues over whether the CFPB’s structure is constitutional. Cordray along with consumer groups hail the rule as a victory for consumers, the WSJ reported. “By restoring the ability of consumers to file or join group lawsuits, the rule gives companies more incentive to comply with the law. And the deterrent effect of such cases can more broadly influence the business practices of other companies as well,” read a statement from Cordray. The rule also requires companies to insert language into their arbitration agreements reflecting the rule’s limitations and to submit their claims, awards, and other information about the arbitration of individual disputes to the CFPB to help the agency monitor arbitrations. ]]>http://mfdf.org/forum-news/article/cfpb-bans-forced-arbitrationMFDF Webinar: MPI Annual Survey of Gartenberg Profitability BenchmarksWed, 19 Jul 2017 09:00:00 -0400Wed, 19 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/mfdf-webinar-mpi-annual-survey-of-gartenberg-profitability-benchmarksLeslie Beckbridge<div>MPI&rsquo;s 2017 survey will provide benchmarks from analysis of 2016 financial statements of 18 comparable public Asset Management companies. This survey begins to include the impact of lower fees and negative flows in some Active Managers.</div>
<div>&nbsp;</div>
<div>This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Thursday, July 20, 2017. <a href="http://mfdf.org/event-details?EVENTID=5413" target="_blank">Register online</a>.</div><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=NEuDEAZKeXE:QIWlIk1rfe0:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/NEuDEAZKeXE" height="1" width="1" alt=""/>MPI’s 2017 survey will provide benchmarks from analysis of 2016 financial statements of 18 comparable public Asset Management companies. This survey begins to include the impact of lower fees and negative flows in some Active Managers.

This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Thursday, July 20, 2017. Register online.

]]>http://mfdf.org/forum-news/article/mfdf-webinar-mpi-annual-survey-of-gartenberg-profitability-benchmarksPaper Explores Use of “Super Directors” to Improve Board Access to Information from ManagementTue, 18 Jul 2017 09:00:00 -0400Tue, 18 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/paper-explores-use-of-super-directors-to-improve-board-accessLeslie Beckbridge<p>An <a href="https://poseidon01.ssrn.com/delivery.php?ID=836003098074001066001109120087069081113072089033089044065118028103091071064019080096019037058000058022054081001008087078099074056045086013087030087016111066002026065021029028124090119072123099110108098120109083119094029084025007119068024127085085103115&amp;EXT=pdf" target="_blank">article</a> in the Wisconsin Law Review by academics from Harvard Law School and University of Wisconsin Law School observes that independent directors of corporations remain extremely dependent on company management for information and recommends that boards establish a dedicated function aimed at minimizing dependence on management for information necessary for decision-making. The article observes that corporate independent directors often &ldquo;lack the time, adequate resources, and the industry-specific knowledge to properly obtain, digest, and analyze the extensive and complex information that modern boards are tasked with evaluating.&rdquo; The authors describe how activist hedge funds have dealt with this problem by appointing a &ldquo;super director&rdquo; who has the ability to devote the time and resources to collect and process information independent of company management and can &ldquo;transcend the limitations that ordinary directors experience due to their part-time role and limited access to company information.&rdquo; The &ldquo;super director&rdquo; is able to provide his work product to the entire board, allowing the board to base its decision-making on more balanced and complete information. The authors however acknowledge the limits and disadvantages posed by such activist-appointed directors and propose the creation of a &ldquo;Board Suite&rdquo;&mdash; a dedicated office within a board that would be in charge of independent data collection and dissemination, therefore minimizing the dependence of the board on management for its information. The authors also suggest more universally applicable ways to obtain information from management, including: empowering the lead independent director to step into a &ldquo;super director&rdquo; function by increasing the lead independent director&rsquo;s compensation and&nbsp; time commitment to the company and prolonging the time directors serve on the board.&nbsp;</p><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=yDj565dOJk4:qUhE5-XUUSE:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/yDj565dOJk4" height="1" width="1" alt=""/>An article in the Wisconsin Law Review by academics from Harvard Law School and University of Wisconsin Law School observes that independent directors of corporations remain extremely dependent on company management for information and recommends that boards establish a dedicated function aimed at minimizing dependence on management for information necessary for decision-making. The article observes that corporate independent directors often “lack the time, adequate resources, and the industry-specific knowledge to properly obtain, digest, and analyze the extensive and complex information that modern boards are tasked with evaluating.” The authors describe how activist hedge funds have dealt with this problem by appointing a “super director” who has the ability to devote the time and resources to collect and process information independent of company management and can “transcend the limitations that ordinary directors experience due to their part-time role and limited access to company information.” The “super director” is able to provide his work product to the entire board, allowing the board to base its decision-making on more balanced and complete information. The authors however acknowledge the limits and disadvantages posed by such activist-appointed directors and propose the creation of a “Board Suite”— a dedicated office within a board that would be in charge of independent data collection and dissemination, therefore minimizing the dependence of the board on management for its information. The authors also suggest more universally applicable ways to obtain information from management, including: empowering the lead independent director to step into a “super director” function by increasing the lead independent director’s compensation and time commitment to the company and prolonging the time directors serve on the board. ]]>http://mfdf.org/forum-news/article/paper-explores-use-of-super-directors-to-improve-board-accessAcademics Say Rise of Index Fund Investing Poses Challenges for Corporate GovernanceMon, 17 Jul 2017 09:00:00 -0400Mon, 17 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/academics-say-rise-of-index-fund-investing-poses-challengesLeslie Beckbridge<p>Two professors in an <a href="https://www.wsj.com/articles/index-funds-are-great-for-investors-risky-for-corporate-governance-1498170623" target="_blank">opinion</a> piece for the Wall Street Journal write that the popularity of passive investing holds negative implications for corporate governance. The authors suggest that index funds may be hesitant to devote resources to monitoring corporate governance of the companies they invest in since any amount spent on a particular company would also benefit rivals investing in the same stock. The authors also observe that, while institutional investors like Vanguard, State Street and BlackRock may want their portfolio companies to be well run, they may not want to pay higher fees for monitoring or governance. The authors see potential negative effects if &ldquo;one-size-fits-all governance solutions&rdquo; are applied across vastly different companies. They propose three areas in which the law can ensure that institutional investors make informed decisions about corporate governance: relying on corporate governance experts; creating in-house governance teams that make recommendations to a fund&rsquo;s managers; and encouraging passive institutional investors to abstain from voting altogether.&nbsp;Vanguard Chairman and CEO Bill McNabb in a <a href="https://www.wsj.com/articles/proxy-votes-certainly-matter-to-index-funds-1499289400" target="_blank">response</a> to the authors&rsquo; commentary contended that index fund managers care about corporate governance and rejected the suggestion that index funds abstain from voting as &ldquo;irresponsible and ill-informed.&rdquo;</p><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=0AFtPyqsT8w:CdsoULIwhUk:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/0AFtPyqsT8w" height="1" width="1" alt=""/>Two professors in an opinion piece for the Wall Street Journal write that the popularity of passive investing holds negative implications for corporate governance. The authors suggest that index funds may be hesitant to devote resources to monitoring corporate governance of the companies they invest in since any amount spent on a particular company would also benefit rivals investing in the same stock. The authors also observe that, while institutional investors like Vanguard, State Street and BlackRock may want their portfolio companies to be well run, they may not want to pay higher fees for monitoring or governance. The authors see potential negative effects if “one-size-fits-all governance solutions” are applied across vastly different companies. They propose three areas in which the law can ensure that institutional investors make informed decisions about corporate governance: relying on corporate governance experts; creating in-house governance teams that make recommendations to a fund’s managers; and encouraging passive institutional investors to abstain from voting altogether. Vanguard Chairman and CEO Bill McNabb in a response to the authors’ commentary contended that index fund managers care about corporate governance and rejected the suggestion that index funds abstain from voting as “irresponsible and ill-informed.”]]>http://mfdf.org/forum-news/article/academics-say-rise-of-index-fund-investing-poses-challengesDERA Economist Discusses Market Fragility Concerns and Evolving Risks Thu, 13 Jul 2017 09:00:00 -0400Thu, 13 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/dera-economist-discusses-market-fragility-concerns-evolving-risksLeslie Beckbridge<p>In a recent <a href="https://www.sec.gov/news/speech/bauguess-keynote-buy-side-risk-usa-2017-062017" target="_blank">speech</a>, Scott W. Bauguess, the acting director and acting chief economist of the SEC&rsquo;s Division of Economic and Risk Analysis, discussed trends in the asset management industry and related financial stability risks. &nbsp;He urged regulators and market participants to &ldquo;remain vigilant in assessing these evolving risks and their potential impact.&rdquo; Bauguess highlighted the following trends as concerning:</p>
<ul>
<li>The rapid growth in funds investing in fixed-income securities and other alternative investments presents potential market risk because such investments are less liquid and more susceptible to the risk of fire sales, which on a large scale, can threaten financial stability.</li>
<li>The prevalence of a &ldquo;herd mentality&rdquo; among investors and fund managers, who respond similarly to a market shock, <em>e.g.,</em> by hoarding cash, can threaten financial stability. Bauguess noted that a key concern is whether capital from redemptions is invested back into the market or banks. Bauguess also observed fund managers&rsquo; tendency to collectively shift toward more liquid assets during times of stress and warned that funds&rsquo; common pursuit for increased liquidity could exacerbate downward selling pressure in the market.</li>
<li>Robo-advisers and rules-based investing executed by fixed algorithms could also unintentionally result in mechanical herding -- the effects of which warrant further monitoring for potential market risks.</li>
</ul>
<p>Bauguess acknowledged that many of the SEC&rsquo;s market reforms, including the Liquidity Risk Management Rule, address these market fragility concerns but&nbsp;noted there was a continuing need for regulators and market participants to monitor and more clearly assess and respond to these emerging risks using accurate and reliable data. &nbsp;&nbsp;</p><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=XTszrWPpttg:GdtHPh3ADwc:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/XTszrWPpttg" height="1" width="1" alt=""/>In a recent speech, Scott W. Bauguess, the acting director and acting chief economist of the SEC’s Division of Economic and Risk Analysis, discussed trends in the asset management industry and related financial stability risks. He urged regulators and market participants to “remain vigilant in assessing these evolving risks and their potential impact.” Bauguess highlighted the following trends as concerning:

The rapid growth in funds investing in fixed-income securities and other alternative investments presents potential market risk because such investments are less liquid and more susceptible to the risk of fire sales, which on a large scale, can threaten financial stability.

The prevalence of a “herd mentality” among investors and fund managers, who respond similarly to a market shock, e.g., by hoarding cash, can threaten financial stability. Bauguess noted that a key concern is whether capital from redemptions is invested back into the market or banks. Bauguess also observed fund managers’ tendency to collectively shift toward more liquid assets during times of stress and warned that funds’ common pursuit for increased liquidity could exacerbate downward selling pressure in the market.

Robo-advisers and rules-based investing executed by fixed algorithms could also unintentionally result in mechanical herding -- the effects of which warrant further monitoring for potential market risks.

Bauguess acknowledged that many of the SEC’s market reforms, including the Liquidity Risk Management Rule, address these market fragility concerns but noted there was a continuing need for regulators and market participants to monitor and more clearly assess and respond to these emerging risks using accurate and reliable data.

]]>http://mfdf.org/forum-news/article/dera-economist-discusses-market-fragility-concerns-evolving-risksMFDF Webinar: A Primer on Cybersecurity InsuranceWed, 12 Jul 2017 09:00:00 -0400Wed, 12 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/mfdf-webinar-a-primer-on-cybersecurity-insuranceLeslie Beckbridge<div>This webinar will provide an in-depth overview of the tenets of cyber-security insurance. The presentation will begin with a discussion of the growing demand for this type of insurance, delve into recent cyber-security incidents, and extend into to an overview of the general areas of coverage under a cyber-liability policy.</div>
<div>&nbsp;</div>
<div>This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Wednesday, July 13, 2017. <strong><a href="http://mfdf.org/event-details?EVENTID=5411" target="_parent">Register online</a></strong>.</div><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=4eTMjXkQxDc:eb3CG7YbGn0:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/4eTMjXkQxDc" height="1" width="1" alt=""/>This webinar will provide an in-depth overview of the tenets of cyber-security insurance. The presentation will begin with a discussion of the growing demand for this type of insurance, delve into recent cyber-security incidents, and extend into to an overview of the general areas of coverage under a cyber-liability policy.

This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Wednesday, July 13, 2017. Register online.

]]>http://mfdf.org/forum-news/article/mfdf-webinar-a-primer-on-cybersecurity-insuranceDOL Seeks Input on Changes to Fiduciary Rule, Possible Extension of Applicability DateTue, 11 Jul 2017 09:00:00 -0400Tue, 11 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/dol-seeks-input-on-changes-to-fiduciary-rule-possible-extensionLeslie Beckbridge<p>The Department of Labor has issued another <a href="https://www.dol.gov/sites/default/files/ebsa/temporary-postings/definition-of-the-term-fiduciary-request-for-information.pdf" target="_blank">request</a> for public comment on the Fiduciary Rule, seeking additional input about possible exemption approaches as well as the advisability of extending the January 1, 2018, applicability date. The DOL currently is reviewing the rule, parts of which have been in effect since June 9, 2017. The request for comment discussed the industry&rsquo;s approaches to comply with the rule so far and called for more information on fund industry innovations, including the use of clean shares.&nbsp; Comments on extending the January 1, 2018, applicability date of certain provisions of the rule should be submitted to the DOL on or before July 21, 2017. Comments in response to all other questions, particularly further exemptions or changes to the rule, should be submitted to the DOL on or before August 7, 2017. Meanwhile, the DOL defended the Fiduciary Rule in a lawsuit brought by the U.S. Chamber of Commerce and other institutions, according to a Bloomberg <a href="https://www.bna.com/dol-defends-fiduciary-n73014461213/" target="_blank">report</a>. The DOL filed a brief that maintained its support for the rule but said it would not defend a provision that prohibits fiduciaries from claiming the Best Interests Contract Exemption if they enter into arbitration agreements that prevent investors from participating in class-action litigation.&nbsp;</p><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=bwXIViXboI4:qxr38lRCRw4:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/bwXIViXboI4" height="1" width="1" alt=""/>The Department of Labor has issued another request for public comment on the Fiduciary Rule, seeking additional input about possible exemption approaches as well as the advisability of extending the January 1, 2018, applicability date. The DOL currently is reviewing the rule, parts of which have been in effect since June 9, 2017. The request for comment discussed the industry’s approaches to comply with the rule so far and called for more information on fund industry innovations, including the use of clean shares. Comments on extending the January 1, 2018, applicability date of certain provisions of the rule should be submitted to the DOL on or before July 21, 2017. Comments in response to all other questions, particularly further exemptions or changes to the rule, should be submitted to the DOL on or before August 7, 2017. Meanwhile, the DOL defended the Fiduciary Rule in a lawsuit brought by the U.S. Chamber of Commerce and other institutions, according to a Bloomberg report. The DOL filed a brief that maintained its support for the rule but said it would not defend a provision that prohibits fiduciaries from claiming the Best Interests Contract Exemption if they enter into arbitration agreements that prevent investors from participating in class-action litigation. ]]>http://mfdf.org/forum-news/article/dol-seeks-input-on-changes-to-fiduciary-rule-possible-extensionMFDF Webinar: Market Conflicts and Market Quality: The Influence of Incentives on Best ExecutionMon, 10 Jul 2017 09:00:00 -0400Mon, 10 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/mfdf-webinar-market-conflicts-and-market-qualityLeslie Beckbridge<div>Typically, U.S. stock exchanges charge fees for certain transactions and pay &ldquo;rebates&rdquo; for others. A recent IEX study shows that rebates can create incentives for brokers to route orders to those exchanges that pay the highest rebates, interfering with best execution of these trades.&nbsp;Join Elaine Wah, the author of the white paper and IEX&rsquo;s Head of Market Quality, as she discusses the study and how brokers&rsquo; routing decisions can impact execution results and fund performance.</div>
<div>&nbsp;</div>
<div>This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Tuesday, July 11, 2017. <a href="http://mfdf.org/event-details?EVENTID=5414" target="_blank">Register online</a>.</div><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=Uj0F3po247g:UZ9D2qu-cyI:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/Uj0F3po247g" height="1" width="1" alt=""/>Typically, U.S. stock exchanges charge fees for certain transactions and pay “rebates” for others. A recent IEX study shows that rebates can create incentives for brokers to route orders to those exchanges that pay the highest rebates, interfering with best execution of these trades. Join Elaine Wah, the author of the white paper and IEX’s Head of Market Quality, as she discusses the study and how brokers’ routing decisions can impact execution results and fund performance.

This webinar will be broadcast live from 2:00 to 3:00 Eastern time on Tuesday, July 11, 2017. Register online.

]]>http://mfdf.org/forum-news/article/mfdf-webinar-market-conflicts-and-market-qualityReport Recommends Review of Valuation Policies as Prosecutors Target Hedge Funds, Private Equity FirmsThu, 06 Jul 2017 09:00:00 -0400Thu, 06 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/report-recommends-review-of-valuation-policies-as-prosecutors-target-hedge-funds-private-equity-firmsLeslie Beckbridge<p>A <a href="http://www.cmra.com/blog/2017/6/19/are-your-pricing-policies-and-procedures-for-less-liquid-instruments-adequate-the-sec-is-looking" target="_blank">report</a> by CMRA, a risk management and consulting firm, discusses recent enforcement actions against hedge funds that mispriced their portfolio holdings and recommends valuation policy strategies for firms. In May, Bloomberg also <a href="https://www.bloomberg.com/news/articles/2017-05-11/hedge-funds-facing-u-s-criminal-probe-over-bond-valuations" target="_blank">reported</a> on hedge funds facing U.S. criminal probes for allegedly seeking bogus prices from brokers in order to inflate the value of securities in their portfolios. In addition, U.K. regulators are scrutinizing hedge funds and private equity firms with complex and hard-to-sell investments. According to a U.K. news service&nbsp;<a href="https://www.fnlondon.com/articles/watchdog-quizzing-hedge-funds-on-hard-to-value-assets-20170608" target="_blank">report</a>, at least three well-known&nbsp;hedge funds and one private equity firm have been targeted by the Financial Conduct Authority&nbsp;in recent months with requests to see their valuation policy documents. The CMRA report discussed recent SEC actions against asset managers regarding their valuation policies and procedures and in light of those enforcement actions recommends that firms:</p>
<ul>
<li>Update written policies and procedures to reflect new transaction types, new data sources, and &ldquo;lessons learned&rdquo; from others&rsquo; mistakes.</li>
<li>Ensure that written policies and procedures reflect the firm&rsquo;s actual practices.&nbsp;</li>
<li>Implement a pricing process that results in a documented set of challenges and revisions, with any adjustments to pricing source inputs/outputs in writing.</li>
<li>Back-test actual new transactions vs. &ldquo;marks,&rdquo; and validate both third-party and proprietary valuation models for accuracy and reliability.</li>
<li>Maintain a database of broker quotes, pricing service data, screenshots, etc. for less liquid instruments and regularly review volume trends, discrepancies between pricing sources, and bid/offer spreads</li>
</ul><div class="feedflare">
<a href="http://feeds.feedburner.com/~ff/ForumNewsFeed?a=Fl5t6leEDHU:30THanC5O98:yIl2AUoC8zA"><img src="http://feeds.feedburner.com/~ff/ForumNewsFeed?d=yIl2AUoC8zA" border="0"></img></a>
</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/Fl5t6leEDHU" height="1" width="1" alt=""/>A report by CMRA, a risk management and consulting firm, discusses recent enforcement actions against hedge funds that mispriced their portfolio holdings and recommends valuation policy strategies for firms. In May, Bloomberg also reported on hedge funds facing U.S. criminal probes for allegedly seeking bogus prices from brokers in order to inflate the value of securities in their portfolios. In addition, U.K. regulators are scrutinizing hedge funds and private equity firms with complex and hard-to-sell investments. According to a U.K. news service report, at least three well-known hedge funds and one private equity firm have been targeted by the Financial Conduct Authority in recent months with requests to see their valuation policy documents. The CMRA report discussed recent SEC actions against asset managers regarding their valuation policies and procedures and in light of those enforcement actions recommends that firms:

Update written policies and procedures to reflect new transaction types, new data sources, and “lessons learned” from others’ mistakes.

Ensure that written policies and procedures reflect the firm’s actual practices.

Implement a pricing process that results in a documented set of challenges and revisions, with any adjustments to pricing source inputs/outputs in writing.

Back-test actual new transactions vs. “marks,” and validate both third-party and proprietary valuation models for accuracy and reliability.

]]>http://mfdf.org/forum-news/article/report-recommends-review-of-valuation-policies-as-prosecutors-target-hedge-funds-private-equity-firmsU.K. Regulator Criticizes Financial Industry on Performance, Competitiveness and Pushes for Broad ReformsWed, 05 Jul 2017 09:00:00 -0400Wed, 05 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/uk-regulator-criticizes-financial-industryLeslie Beckbridge<p>The Financial Conduct Authority, the U.K.&rsquo;s chief financial regulator, recently issued a <a href="https://www.fca.org.uk/publication/market-studies/ms15-2-3.pdf" target="_blank">report</a> critical of the asset management industry after an 18-month investigation and proposed significant, wide-ranging reforms. The Financial Times <a href="https://www.ft.com/content/a5d09926-5a7c-11e7-b553-e2df1b0c3220" target="_blank">reported</a> that the FCA&rsquo;s recommended reforms would make the U.K. one of the &ldquo;toughest regimes in the world for asset managers.&rdquo; &nbsp;The FCA study found weak price competition across the asset management industry&rdquo; and observed that U.K. firms, particularly retail active asset managers, do not typically compete on price. The report also faulted fund performance, and the relationship between price and performance: &ldquo;[O]ur evidence suggests that, on average, both actively managed and passively managed funds did not outperform their own benchmarks after fees.&rdquo; The report included a number of proposed remedies including: strengthening the duty on fund managers to act in the best interests of investors, increasing accountability, and introducing a minimum level of independence in governance structures &ndash; specifically, requiring two independent trustees on fund boards -- among other similarities to the U.S. mutual fund structure.&nbsp; The FCA report also recommended improved disclosures to investors and initiatives to increase competitive pressures on fund managers.&nbsp; Importantly, the FCA said it supports the disclosure of a single all-in fee to investors, which will include the asset management fee and an estimate of transaction charges. The Wall Street Journal <a href="https://www.wsj.com/article_email/u-k-regulator-calls-for-major-shake-up-of-asset-management-industry-1498637039-lMyQjAxMTE3OTI2ODkyNjgzWj/" target="_blank">reported</a> that the industry has long lobbied against an all-in fee for investors and that the FCA report may increase pressure on active managers who are already squeezed by the growth of passive investing.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/_2GaZi7t1v0" height="1" width="1" alt=""/>The Financial Conduct Authority, the U.K.’s chief financial regulator, recently issued a report critical of the asset management industry after an 18-month investigation and proposed significant, wide-ranging reforms. The Financial Times reported that the FCA’s recommended reforms would make the U.K. one of the “toughest regimes in the world for asset managers.” The FCA study found weak price competition across the asset management industry” and observed that U.K. firms, particularly retail active asset managers, do not typically compete on price. The report also faulted fund performance, and the relationship between price and performance: “[O]ur evidence suggests that, on average, both actively managed and passively managed funds did not outperform their own benchmarks after fees.” The report included a number of proposed remedies including: strengthening the duty on fund managers to act in the best interests of investors, increasing accountability, and introducing a minimum level of independence in governance structures – specifically, requiring two independent trustees on fund boards -- among other similarities to the U.S. mutual fund structure. The FCA report also recommended improved disclosures to investors and initiatives to increase competitive pressures on fund managers. Importantly, the FCA said it supports the disclosure of a single all-in fee to investors, which will include the asset management fee and an estimate of transaction charges. The Wall Street Journal reported that the industry has long lobbied against an all-in fee for investors and that the FCA report may increase pressure on active managers who are already squeezed by the growth of passive investing. ]]>http://mfdf.org/forum-news/article/uk-regulator-criticizes-financial-industryCFTC’s Bowen to Step Down, Leaving Acting Chairman as Sole Commissioner Mon, 03 Jul 2017 09:00:00 -0400Mon, 03 Jul 2017 09:00:00 -0400http://mfdf.org/forum-news/article/cftc-s-bowen-to-step-down-leaving-acting-chairman-as-sole-commissionerLeslie Beckbridge<p>CFTC Commissioner Sharon Bowen, the sole Democrat on the two-member Commission, announced she is stepping down from the agency within the next few months or sooner if another nominee is confirmed. Bowen in a <a href="http://www.cftc.gov/PressRoom/SpeechesTestimony/bowenstatement062017" target="_blank">statement</a> said: &ldquo;Having just two Commissioners makes routine business difficult, but makes important policy decisions almost impossible. Without a full complement of commissioners to consider the far-reaching implications of our decisions, we are frozen in place while the markets we regulate are moving faster every day.&rdquo; The CFTC currently has three vacant commissioner posts. According to the <a href="https://www.wsj.com/articles/cftc-democratic-commissioner-sharon-bowen-to-step-down-1497980061" target="_blank">Wall Street Journal</a>, two Republicans have been&nbsp;nominated as commissioners: Dawn Stump, a derivatives lobbyist who formerly worked on the Senate Agriculture Committee, and Brian Quintenz, a former aide in the U.S. House of Representatives. Commissioner and Acting Chairman Christopher Giancarlo recently faced a Senate panel in a confirmation hearing on his nomination to be permanent chairman.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/nl-Jz-4zYm8" height="1" width="1" alt=""/>CFTC Commissioner Sharon Bowen, the sole Democrat on the two-member Commission, announced she is stepping down from the agency within the next few months or sooner if another nominee is confirmed. Bowen in a statement said: “Having just two Commissioners makes routine business difficult, but makes important policy decisions almost impossible. Without a full complement of commissioners to consider the far-reaching implications of our decisions, we are frozen in place while the markets we regulate are moving faster every day.” The CFTC currently has three vacant commissioner posts. According to the Wall Street Journal, two Republicans have been nominated as commissioners: Dawn Stump, a derivatives lobbyist who formerly worked on the Senate Agriculture Committee, and Brian Quintenz, a former aide in the U.S. House of Representatives. Commissioner and Acting Chairman Christopher Giancarlo recently faced a Senate panel in a confirmation hearing on his nomination to be permanent chairman.]]>http://mfdf.org/forum-news/article/cftc-s-bowen-to-step-down-leaving-acting-chairman-as-sole-commissionerU.K.-Based Firm Successfully Tests Blockchain to Sell Mutual FundsThu, 29 Jun 2017 09:00:00 -0400Thu, 29 Jun 2017 09:00:00 -0400http://mfdf.org/forum-news/article/uk-based-firm-successfully-tests-blockchain-to-sell-mutual-fundsLeslie Beckbridge<p>The Financial Times <a href="https://www.ft.com/content/5927fa2c-4c73-11e7-919a-1e14ce4af89b" target="_blank">reported</a> that a technology company successfully used blockchain to buy and sell mutual funds under test conditions. According to the report, <a href="https://www.calastone.com/news/2017/calastone-successfully-completes-first-phase-of-blockchain-distributed-market-infrastructure-proof-of-concept-for-the-global-funds-industry/" target="_blank">Calastone</a> replicated trades carried out by its clients and its technology proved capable of processing a full day&rsquo;s trades across a wide, global client and fund distribution base. Calastone describes itself as a &ldquo;<em>global funds transaction network and Future50 FinTech pioneer.&rdquo; </em>Northern Trust and Fidelity are among financial firms that have used blockchain in their business activities. The Financial Times also reported that earlier this year, BNP Paribas Securities Services teamed up with Axa Investment Managers on a blockchain project. Among the expected benefits of blockchain are lower transaction costs and improved efficiency. The Calastone test was the largest-scale test of blockchain in the fund industry to date, according to the report.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/hJRgXowKomo" height="1" width="1" alt=""/>The Financial Times reported that a technology company successfully used blockchain to buy and sell mutual funds under test conditions. According to the report, Calastone replicated trades carried out by its clients and its technology proved capable of processing a full day’s trades across a wide, global client and fund distribution base. Calastone describes itself as a “global funds transaction network and Future50 FinTech pioneer.” Northern Trust and Fidelity are among financial firms that have used blockchain in their business activities. The Financial Times also reported that earlier this year, BNP Paribas Securities Services teamed up with Axa Investment Managers on a blockchain project. Among the expected benefits of blockchain are lower transaction costs and improved efficiency. The Calastone test was the largest-scale test of blockchain in the fund industry to date, according to the report.]]>http://mfdf.org/forum-news/article/uk-based-firm-successfully-tests-blockchain-to-sell-mutual-fundsChamber of Commerce Teams up With Firms to Establish Standards on Cyber RatingsWed, 28 Jun 2017 09:00:00 -0400Wed, 28 Jun 2017 09:00:00 -0400http://mfdf.org/forum-news/article/chamber-of-commerce-teams-up-with-firms-to-establish-standards-on-cyber-ratingsLeslie Beckbridge<p>Reuters is <a href="https://www.reuters.com/article/us-banks-cyber-idUSKBN19B1ZL" target="_blank">reporting</a> that large corporations and banks, including JPMorgan Chase, Goldman Sachs, Starbucks Corp. and Aetna, are jointly organizing with the U.S. Chamber of Commerce to establish common principles to help them understand and possibly challenge their cybersecurity ratings given by startup firms. Reuters reports that startup firms that collect and analyze data to rate major companies on cybersecurity are gaining in prominence and attracting venture capital funding. Third parties, including insurers, use the ratings to assess companies&rsquo; ability to withstand cyberattacks and to evaluate firms&rsquo; cyber liability. Reuters quoted an information security executive at a large bank, who expressed concern that there is a lack of transparency around the methodology behind the ratings.&nbsp;</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/UVpoftnt37M" height="1" width="1" alt=""/>Reuters is reporting that large corporations and banks, including JPMorgan Chase, Goldman Sachs, Starbucks Corp. and Aetna, are jointly organizing with the U.S. Chamber of Commerce to establish common principles to help them understand and possibly challenge their cybersecurity ratings given by startup firms. Reuters reports that startup firms that collect and analyze data to rate major companies on cybersecurity are gaining in prominence and attracting venture capital funding. Third parties, including insurers, use the ratings to assess companies’ ability to withstand cyberattacks and to evaluate firms’ cyber liability. Reuters quoted an information security executive at a large bank, who expressed concern that there is a lack of transparency around the methodology behind the ratings. ]]>http://mfdf.org/forum-news/article/chamber-of-commerce-teams-up-with-firms-to-establish-standards-on-cyber-ratingsReports Say President Trump May Nominate Hester Peirce to SEC Commissioner PostTue, 27 Jun 2017 09:00:00 -0400Tue, 27 Jun 2017 09:00:00 -0400http://mfdf.org/forum-news/article/reports-say-president-trump-may-nominate-hester-peirce-to-secLeslie Beckbridge<p>According to a Bloomberg <a href="https://www.bloomberg.com/news/articles/2017-06-16/trump-said-likely-to-nominate-hester-peirce-for-sec-commissioner" target="_blank">report</a>, President Trump is expected to select Hester Peirce, a research fellow at the Mercatus Center at George Mason University, to fill a Republican commissioner vacancy at the SEC. The report also speculates that candidates for the Democratic vacancy include Robert Jackson, a professor at Columbia University, and Bharat Ramamurti, currently an aide to Senator Elizabeth Warren. Hester Peirce had been selected as a commissioner in 2015 under the Obama administration but her nomination faltered in the Senate Banking Committee. Meanwhile, the SEC <a href="https://www.sec.gov/news/press-release/2017-113" target="_blank">announced</a> that Acting Director of the Division of Enforcement Stephanie Avakian and former federal prosecutor Steven Peikin have been named co-Directors of the Division of Enforcement, among other hires in <a href="https://www.sec.gov/news/press-release/2017-118" target="_blank">Corporation Finance</a> and its regional offices. The Trump Administration also recently <a href="https://www.bloomberg.com/news/articles/2017-06-19/trump-s-banking-deregulation-team-takes-shape-with-pick-for-fdic" target="_blank">selected</a> James Clinger, chief counsel for the House Financial Services Committee, to serve as chairman of the FDIC.</p><div class="feedflare">
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</div><img src="http://feeds.feedburner.com/~r/ForumNewsFeed/~4/M4qfofUJnI8" height="1" width="1" alt=""/>According to a Bloomberg report, President Trump is expected to select Hester Peirce, a research fellow at the Mercatus Center at George Mason University, to fill a Republican commissioner vacancy at the SEC. The report also speculates that candidates for the Democratic vacancy include Robert Jackson, a professor at Columbia University, and Bharat Ramamurti, currently an aide to Senator Elizabeth Warren. Hester Peirce had been selected as a commissioner in 2015 under the Obama administration but her nomination faltered in the Senate Banking Committee. Meanwhile, the SEC announced that Acting Director of the Division of Enforcement Stephanie Avakian and former federal prosecutor Steven Peikin have been named co-Directors of the Division of Enforcement, among other hires in Corporation Finance and its regional offices. The Trump Administration also recently selected James Clinger, chief counsel for the House Financial Services Committee, to serve as chairman of the FDIC.]]>http://mfdf.org/forum-news/article/reports-say-president-trump-may-nominate-hester-peirce-to-sec